WEAKNESSES

Insufficient number of exporting companies, loss of competitiveness and market share

Insufficient innovation effort, low level of product range

High level of public debt

Low employment rate of young and older workers

Risk assessment

Recovery confirmed, boosted by exogenous drivers

Growth rebounded in 2015, buoyed by public and household consumption, with the latter, however, set to continue as the main contributor to growth in 2016. The expected rate of growth is still below the pre-2008 crisis peak. Residential investment contracted again in 2015, putting pressure on activity, but the outlook now seems better as building permits and new builds have stabilised. The contribution of household investment to growth is likely to be nil in 2016. The level of unemployment continues to restrain private investments and spending (10.3% at the end of October 2015) and is likely to diminish only very gradually in 2016 to represent 10% of the economically active population in the second half of 2016. The rebound in business investment has not led to a high level of job creation. 78% of production capacity was used at end 2015. Even if this figure is growing, it is still not high enough to encourage businesses to invest heavily. Before the 2008 crisis, business investment grew by an average of 3.8% (2003-2007) against 2% in 2015. According an INSEE survey, business owners' primary reason for investing is to modernise their factories rather than to grow. Businesses are however in better financial health. The Competitiveness and Employment Tax Credit (CICE), together with lower energy costs, enabled an almost 2-percentage point increase in their margins in 2015 Helped by these measures and by renewed activity, the level of company insolvencies continued to fall by 2.5% in 2015 and is expected to be under 60,000 in 2016 for the first time since 2012. Nonetheless, some sectors remain under a lot of pressure, such as construction, pharmaceuticals, clothing (textiles) and wooden furniture (paper/wood sector). The livestock sector has also been hit by low prices and the plastics industries have not benefitted from the slump in the price of a barrel of oil.

Despite the disapearance of some of the effects of lower oil prices on price movements generally, inflation is expected to remain weak, due to the limited recovery of domestic demand.

The tourism sector will put pressure on the current account balance in 2016

In 2015, French exports were dynamic, driven by France's large industrial sectors (aeronautics, automotives, defence). The euro's weakness against the dollar has helped French exporting companies, 53% of which export beyond the euro zone. Meanwhile, weak oil prices have brought down the import bill. These dynamics are likely to be similar in 2016, as the price of Brent is expected to remain low. In 2016, the euro could again depreciate against the dollar, as the two large central banks - European (ECB) and US (FED) - are on different tracks. In December 2015, the Fed raised its key rate, confirming the gradual tightening of its ultra-expansionary policy implemented after the 2008 financial crisis. The ECB, on the other hand, again eased its monetary policy in 2015.

While the trade deficit could benefit from these dynamics to continue to narrow, the current account deficit will be burdened by the decline in tourism income. Indeed, this sector represents 7.5% of GDP, of which 2.5% can be attributed to foreign tourists. The two attacks in Paris in January and then in November 2015 could lead to a temporary drop in visits to the country which, in 2014, was the most visited in the world.

The public deficit will remain above 3%

Although France is committed to bringing the French public deficit down to 3.3% of GDP in 2016 as required by the European Commission, the Paris attacks have jeopardised this commitment as the government has announced the creation of 8,500 security jobs (police, customs, and justice). Nevertheless, the budget adopted by the Parliament in September will result in cuts to public spending in 2016, amounting to EUR 16 billion as part of a drive to save EUR 50 billion between 2015 and 2017 (EUR 18.6 billion in 2015).

As a consequence of the public spending cuts, the collective services sector is under pressure. Company insolvencies in the sector meanwhile rose by 5.7% as at end September 2015, year on year.

President Hollande's last full year in office

The French presidential and parliamentary elections will take place in April 2017. The current government under Prime Minister Valls is not doing well in the opinion polls. However, the Paris attacks have strengthened position of the current President and his team. Three parties seem likely to get through the first round of voting: the centre-left party of the current government (Socialist Party), the conservative party (the Republicans) and the far right party (Front National) which made a significant breakthrough in the December 2015 regional elections.

(Last update : January 2016 )

Payment

Among methods of payment, the bank card is now the instrument used most inFrance, replacing cheques, which are nonetheless still widely used.

For cheques remaining unpaid over 30 days from the date they were first presented for payment, the beneficiary may immediately obtain an enforcement order (without need of further procedural act or cost) based on a certificate of non-payment provided by his banker after a second unsuccessful presentation of the cheque for payment and where the debtor has not provided proof of payment within 15 days of formal notice to pay served by a bailiff (article L 131-73 of the monetary and financial code).

Bills of exchange, a much less frequently used mode of payment than cheques, have been in virtually constant decline in terms of number of operations with volume remaining essentially steady in value terms.

Bills of exchange are attractive for companies insofar as they may be discounted or transferred, therefore providing a valuable source of short-term financing. Moreover, they allow creditors to bring legal recourse in respect of “exchange law” (droit cambiaire) and are particularly suitable for instalment payments.

In value terms, however, cheques and transfers still represent most script payment transactions.

Bank transfers can be made withinFranceor internationally via the SWIFT electronic network used in French banking circles, which offers a reliable platform for timely payment subject to mutual trust and confidence between suppliers and their customers.

The directive 2007/64/EC (in force since 1st November 2009) on “payment services in the internalEuropean market” sets the legal basis for the creation of a single area for payments in Euros (SEPA), in order to harmonize the rules applicable to the different types of payment (transfers, direct debits, payment cards).

Debt collection

Since the “New Economic Regulations Act” of 15 May 2001, commercial debts automatically bear interest from the day after the due date shown on the invoice or specified in the commercial contract. Late payment penalties and fixed indemnity must be stated on the invoices under penalty of fine.

Unless otherwise stated in the general sales conditions or agreed between the parties, the payment period is set at thirty days from the date of receipt of goods or performance of the service requested.

These payment periods can be shortened if the sale relates to perishable goods, livestock or alcohol and, as a general rule, begin on the day of delivery; they can be extended if the sale relates to products to be shipped abroad.

Some sectors, such as transport, have payment periods subject to exceptions to ordinary law. These payment periods start as of the day the invoice is issued.

The applicable payment periods for the relevant sector in the contract of sale should therefore be checked.

Likewise, the interest rate and conditions of application must be stipulated in the contract and stated on the invoice – failing that, the applicable rate will be the interest rate applied by the European Central Bank in its most recent refinancing operations, raised by ten percentage points as of 1st January 2009.

For the first half of the year in question, the rate applicable is that in force on 1st January and for the second half year in question, the rate applicable is that in force on 1st July.

The Parties can agree on a lower rate, but this cannot be less than the legal interest rate.

The late payment penalties are calculated using the invoice total including taxes as of the morning after the due date; the penalties are not subject to VAT. They are payable without any requirement to issue a formal notice to the debtor.

From 1st January2013, a professional in default of payment is legally liable to its creditor for a fee for collection costs, set to 40 Euros ( should be stipulated in the General Terms and Conditions of Sale).

Failure to pay by the due date may also subject the professional to a civil penalty of up to €75,000 for a natural person or €375,000 for a corporate entity.

Serving the debtor with formal notice to pay the principal claim and contractual or legal interest but also suggesting the possibility of reaching an amicable agreement for the settlement of the debt, nonetheless remains a precondition to initiating any legal action.

Evidence now needs to be shown in the context of the actions undertaken that there was an attempt to reach an agreement with the debtor in question.

This obligation arises from the amended wording of Article 56 of the French Code of Civil Procedure which requires, as of 11 March 2015, an attempt to reach an amicable settlement before the initiation of legal proceedings under penalty of the nullity of the summons.

The only exceptions to this amicable agreement requirement are requests based on compliance with public policy or those justified on the grounds of urgency.

Since 19 June 2008, the current limitation period in civil and commercial matters, was reduced to 5 years and the limitation starts “from the day when the right holder knew or should have known the facts to allow him to apply for such right”.

Where a debt claim results from a contractual undertaking and is both liquid and undisputable, creditors may use the injunction-to-pay procedure (injonction de payer), a flexible system based on the use of pre-printed forms not requiring applicants to argue their case before the court of civil instance (tribunal d’instance) or competent commercial court – the court having jurisdiction in the district where the debtor's registered offices are located.

Via that procedure, creditors can rapidly obtain a court order to be served subsequently by a bailiff.

The defendant has one month to dispute the case.

A fast track procedure (référé-provision) provides creditors with a rapid means of debt collection, even in routine cases lacking any real urgency, provided the claims are not subject to substantive dispute; in such cases, the judge can grant a provisional payment in favour of the applicant that can represent up to 100 per cent of the claim.

However, this fast track procedure requires the presence of an attorney to represent the creditor in court.

If a claim proves to be litigious, the judge competent to rule on special urgency (juge des référés) evaluates whether the claim is well founded. As appropriate, the judge may then declare himself incompetent and, based on his assessment of the apparent validity of the case, invite the plaintiff to seek a ruling on the substance of the case through the formal court process.

Formal procedures of this kind permit having the validity of a claim recognized by the court, a relatively lengthy process lasting about a year or more owing to the emphasis placed on theadversarial natureof proceedings and the numerous phases involved in the French procedural system: submission of supporting case documents, written submissions by the litigants, examination of the types of evidence, various recesses for deliberations, and at last, the hearing for oral pleadings (audience de plaidoirie).

If justified by a claim’s size and the uncertain solvency of the debtor, legal action may include a petition to obtain an attachment order on available assets and thereby protect the plaintiff's interests pending completion of the proceedings and enforcement of the court's final judgment.